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Recent consumption data confirm downward trend in
economic activity. The Trade Federation of the State of São
Paulo (FCESP), reports that seasonally adjusted real retail sales in São
Paulo dropped 3.9% in May over May last year. The FCESP survey further
showed that retail sales slowed year over year to 2.8% in May, from 4.9%
and 8.0% in April and March respectively. Furthermore, the consumer
confidence index (IIC) heralds a worsening in consumer sentiment. The IIC
plunged 19.0% in June over May. Consumer confidence slid down to the 81.7
level on a scale from zero (highly pessimistic) to 200 (very optimistic),
confirming increased consumer pessimism about the economy. The decline in
consumer confidence resulted from a worsening perception over the likely
effect that the energy rationing, continued currency volatility and higher
interest rates would have on economic conditions.
Industrial production continued to grow at a healthy pace in May but is
showing signs of a slowdown. According to the National Statistical
Institute, ouput rose 4.2% in May over the same month last year, down from
5.9% in April. Robust capital goods output continued to drive industry
with growth reaching 14.9% (April 19.9%) over the same month last year.
Healthy durable consumer goods production (+12.5%) drove up consumer good
production to 4.2%, while intermediate goods production experienced a more
moderate 2.2% uptick. Monthly data confirms the slowdown as seasonally
adjusted growth declined 1.5% in May over April. Participants expect the
current pace of industrial activity to abate in the coming months as
energy rationing forces firms to cut back production. As a result, output
growth is anticipated to drop in the second half of the year.
The more pessimistic growth outlook has
prompted Consensus Forecast participants to again revise downward the GDP
forecast for this year. Panellists have also begun to adjust next year’s
forecasts, as fears mount that the energy-rationing programme may carry
over.
Note:
The above text is an abridged version of the LatinFocus Consensus Forecast
briefing on Brazil. For more details please click here.
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